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Reverse Mortgage Refinance Essentials Bad Credit Refinance Foreclosure

Foreclosure

Foreclosure happens when a homeowner defaults on payments to the lender.  In turn, a trustee or lender attorney goes through the legal process to gain possession of the house.  Once the lender legally takes back the house, or a trustee has sold it through a Public or Sheriff’s sale, the home is officially foreclosed.   

 All the way throughout the legal process, a homeowner can pay off the amount owed to avoid foreclosure.  Paying off the loan can happen through a mortgage refinance which pays off the current loan and allows the homeowner to start fresh with a new lender.  Mortgage refinancing may lower the house payment and make it more affordable for the homeowner.  If there is a large amount of equity in the house, it may behoove the homeowner to refinance, even with a bad credit mortgage.

 

Sometimes the lender will allow the homeowner to sell the house at a loss to avoid foreclosure.  This is called a “short sale.”  The bank will have the final say concerning what the sales price of the house will be, since they are taking the losses.    

 

It is important for homeowners to realize that regardless of stories one may hear, the foreclosure timeline is rather short.  A bank can foreclose and evict rather quickly.  The legal process can be initiated in as little as 45 days from the first day a house payment is missed.  Foreclosure can happen within six months of that missed payment, depending on state laws. If the homeowner is still in the house at the time of foreclosure, he or she can be forcefully removed by a sheriff.  Sometimes the bank will allow the homeowner to stay for a brief period of time in order to make arrangements for other housing.  

  

Being aware of the reality of foreclosure can help a homeowner adequately prepare to avoid it.  If the homeowner hasn’t waited until a mortgage payment is 30 days late, a mortgage refinance can be advantageous.  Rates are historically low.  Even if a homeowner doesn’t have perfect credit, a mortgage refinance lowering the house payment is possible if house payments have been made on time.   

 

If foreclosure seems eminent, communication with the lender or servicer is important.  Avoiding calls may lead the lender to think that the borrower doesn’t care to make payments.  The lender may think the house has been abandoned.  Either way, this avoidance may fuel a sense of urgency and speed up the foreclosure process.  The homeowner should call the lender or loan servicer as soon as a payment can’t be made.  The lender is more willing to work with a borrower who stays in contact.  A reasonable payment plan for a missed payment can be negotiated.  Loss of income may cause a homeowner to miss more than just one house payment.  Sometimes a loan modification allows the lender to recover those missed payments.  This may not be an option if the homeowner waits too long or cuts off communication with the lender.  

 

Talking to a foreclosure councilor is helpful when facing foreclosure.  Government-sponsored programs and emergency funds may available.  A foreclosure councilor who is approved by the US Department of Housing and Urban Development (HUD) will be able to provide objective information about emergency programs.  Foreclosure councilors don’t work for a bank or mortgage company, and remain neutral. They have been trained in all aspects of housing counseling.  Their job is to advise and provide information to services that can help the homeowner better his or her financial situation. 

 

Avoiding foreclosure is advisable.  Not only does a foreclosure cause a person emotional damage, it can ruin good credit.  A homeowner may take a hit on their taxes for the lender’s losses on the defaulted loan.  New federal regulations require a waiting period of 3 years after a foreclosure before a borrower can apply for an FHA loan.  Laws have been proposed which may increase the waiting period to 5 years.  

  

Bear in mind that banks have a vested interest in assisting if a house payment is missed.  Although circumstances such as loss of income or a bad market can’t be circumvented, losing a home through foreclosure can be avoided.   

  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure

 

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